Impact and Implications of the Food Crisis on Microfinance

This CGAP survey reports on the impact of food crisis on microfinance and MFI clients. It suggests proactive roles that MFIs, governments, donors and investors can play to cope with current and future food crises. In August 2008, although price increases were felt in all countries surveyed, MFI managers felt the worst was yet to come. Impact on MFI clients included:

• Decreased food consumption;
• Cut-backs on non-food expenses;
• Lack of profitability among small businesses;
• Use of savings and assets to buy food;
• Increased malnutrition.

MFIs faced increased operating costs and liquidity problems. They also found it harder to collect savings and reach their goals. They tried to solve these challenges by applying flexible loan policies, rescheduling loans, working with relief organizations and reducing interest rates. The presentation suggests that MFIs should:

• Serve as an instrument to increase agricultural production;
• Adapt their policies to alleviate the consequences of the food crisis;
• Focus on expanding access to finance;
• Adopt emergency measures to help affected people;
• Serve as a channel to distribute aid.